Innovative Financial Leaders Are Expanding Access to Capital, Building Generational Wealth, and Helping Growers Convert to Regenerative Practices
While income levels among most demographic groups in the U.S. have climbed in recent years, the racial wealth gap remains wide. On average, U.S. white families have about 10 times as much wealth as Black or Latino households. The wealth gap not only takes its toll over time, it also creates immediate challenges when financial emergencies arise. And research shows that if the racial wealth divide is unaddressed, the median wealth of Black Americans will fall to zero by 2053.
The venture capital sector had a record-breaking year both in terms of capital raised and capital deployed in 2020. However, the percentage of that capital that flowed to entities led by women or others who are Black, Indigenous, or People of Color actually decreased.
Numbers tell part of the story:
- Black founders received 0.6% of all U.S. venture capital in 2020.
- Firms owned by women and non-white men manage 1.3% of the $69 trillion asset management industry.
- Black farmers lose 30,000 acres a month because of financial issues.
It’s the people behind the numbers — and their descendants — that Black-led investing funds and firms are looking to benefit. Their practices include raising and deploying capital to provide broader opportunities for wealth-building. They are building generational wealth while increasing the number of diverse fund managers. And they are providing financial and technical support to diverse farmers as they transition to regenerative practices. The examples that follow are among the growing number of funds that are pursuing racial and gender equity strategies.
Black founders received 0.6% of all U.S. venture capital in 2020.
Reinventure Capital: An Early Connector for Entrepreneurs of Color
Reinventure Capital, a Black- and women-led firm, invests exclusively in U.S.-based companies led and controlled by Black, Indigenous, People of Color and/or female founders. It is currently at breakeven and poised to grow profitably. Founding Partner and President Edward Dugger has been a pioneer in impact investing. He was an early leader in expanding access to capital and other business opportunities for entrepreneurs of color.
“We’re all about creating wealth and opportunity to break the persistent, systemic, steep asymmetry in access to capital and wealth creation and opportunity creation,” says Julianne Zimmerman, Managing Director at Reinventure Capital. Currently, Zimmerman says, Reinventure Capital is both actively investing with four companies in the portfolio so far, and in the final phase of a capital campaign — raising and deploying capital at the same time.
More than 90% of venture capital dollars flow to white U.S.-born men from a dozen universities, Zimmerman says. A significant majority of that capital lands in six metropolitan areas.
“When you think about the extreme hyperconcentration that represents — whether numerically, geographically, by gender, race, ethnicity, economic class — it almost doesn’t matter how you look at it: It’s an extreme hyperconcentration,” Zimmerman says. “What we see is that, unsurprisingly, the entrepreneurial successes that are widely celebrated are really extremely homogeneous, and those narratives tend to further concentrate wealth and opportunity.”
By investing exclusively in companies led by women or founders who are Black, Indigenous, or People of Color that are growing profitably, Reinventure Capital is channeling capital to overlooked innovators, she says. “We’re also helping them to grow companies that are not extractors of value but creators of sustainable value.” Companies in Reinventure Capital’s portfolio must commit to hiring, promoting, and compensating equitably at all levels as they grow, and to sourcing equitably when that’s feasible.
“In the venture capital community at large, we hear people wringing their hands, saying, ‘We wish we could invest in Black and Brown and female founders, but we can’t find any.’ It just means they aren’t looking,” Zimmerman says. “There is no talent or opportunity shortage.”
Data shows that when people are given the same opportunity, professionals who are women or People of Color perform at least as well as their white male peers, she says. “That says that the processes need to change. We are working with our fund, and in cooperation with and collaboration with other funds, to knit together an ecosystem of capital providers who are operating differently — investing with better processes, and for better outcomes.”
For Reinventure Capital, operating differently includes investing with an objective to help companies grow more profitably and create value for all participants, Zimmerman says.
“We are thinking about not just this funding round, not just a future exit; we think about the shape and the trajectory of the company and the equity participation of the founders and employees and stakeholders as equally important,” she says. “For us, if we had a company that had a fantastic financial exit but the founders and employees had only a very tiny stake in that exit — which happens far too often — we would consider that to be a failure on our part. We never want to be in a position where we are at odds with the founders and employees over what constitutes a good outcome.”
This focus on collaboration extends to Reinventure Capital’s work with partner organizations and others in the impact investing community to create a more equitable ecosystem.
“There is ample evidence of systematic network failure: Such longstanding and extreme hyperconcentration of capital is a symptom of the market consistently failing to appropriately or equitably price risk and opportunity. Many would argue that’s intentional,” Zimmerman says. “We’re interested in a different community, ecosystem, and network, and we invest a lot in that.”
Firms owned by women and non-white men manage 1.3% of the $69 trillion asset management industry.
Greenwood Hayden Legacy Partners: Generating and Ensuring Wealth for Future Generations
Lorna Hayden, founder and CEO of Greenwood Hayden Legacy Partners, has seen firsthand the lack of representation and the exclusion of Black Americans and People of Color in the financial ecosystem in her career, starting from her first job as a stockbroker with Lehman Brothers. “I was the only female and the only Black broker on the main floor,” she says. “Noticeably, there were no clients who looked like me either. This trend continued throughout my career at other brokerage firms and investment banks.”
She also grew aware of another financial trend: Black entertainers and athletes with multimillion-dollar salaries and contracts filing for bankruptcy. “To me, there was a clear connection to financial institutions not paying attention to us, much less looking at us as investors,” Hayden says. “It’s not that we don’t know how to accumulate wealth, it’s the lack of trusted guidance and access to investment opportunities.”
That combination of experiences led Hayden to set an early career goal to work with high-net-worth Black Americans and People of Color. Hayden wants to ensure the wealth they generate makes it to future generations. After building her experience, knowledge, and contacts through the years, she is now doing just that with the team at Greenwood Hayden Legacy Partners, a pending Certified B Corporation.
“We understand the cultural experience of our clients, who have been underrepresented, marginalized, and underserved in the financial industry — the nuances, the struggles, and the aspirations,” Hayden says. “Therefore, we want to build sustainable wealth that not only benefits our clients but also their families and the community at large, by investing with a lens toward racial equity, diversity, and inclusion, and also as good stewards toward the environment.”
Greenwood Hayden’s inaugural fund is being established as a “fund of funds.” Rather than investing directly in capital markets, they build their portfolio by investing in other professionally managed funds across multiple asset classes. These include hedge funds, private equity, and VC funds that meet specific criteria for social and environmental impact. Additionally, a majority of the selected portfolio managers must be either women or Black, Indigenous, or other People of Color, advancing Hayden’s goal to give diverse fund managers the credit that is long overdue.
“We want to give our investors who have been historically underserved by Wall Street access to best-in-class, diverse fund managers,” she says. “Studies show these diverse managers are overrepresented in the top quartile of performance. Then you start wondering why they aren’t having more inflows from endowments and other sources — a bias of selection. Hopefully we’re taking those biases out.”
Greenwood Hayden has established four pillars for its pursuit of sustainable Black wealth: investments, responsible stewardship, community, and philanthropy. What this means operationally is investing with an eye on social and environmental benefit. This also means building an intentional community where investors and their families can engage with one another as well as with industry experts, business leaders, scholars and others. Finally, this means earmarking a percentage of profits to high-impact philanthropy.
“One thing that keeps a movement going is capital,” Hayden says. “We seek to support grassroots organizations, NGOs, and other movements that are on the ground doing work that aligns with our mission — financially as well as with our human capital. We’re committed to dismantling systemic barriers by changing public policy.”
Networks and community are key to Greenwood Hayden’s growth and success. This includes making strategic partnerships and alliances in the financial industry as well as with companies that are committed to closing the racial wealth gap.
“We have to do it in collaboration,” Hayden says. “By having these strategic partnerships, we are able to amplify our message, leverage our resources to advance racial, social and economic justice and be a catalyst for change.”
Black farmers lose 30,000 acres a month due to financial issues.
Potlikker Capital: Offering Funding and Community Support for Farmers
Another collaboration aiming for social and environmental impact as well as financial equity is Potlikker Capital and its supported organization, Jubilee Justice. The organizations work together to encourage more Black, Indigenous, and People of Color farmers to pursue regenerative agriculture while offering holistic support during the transition.
Jubilee Justice provides technical assistance, community practice-building and support for farmers while integrated grant, debt, equity and collateral funding comes via Potlikker Capital, named after the juice at the bottom of the “greens” pot. Co-Founders Mark Watson and Konda Mason created the community-governed social justice charitable loan fund to support farmers who are Black, Indigenous, or other People of Color.
With more than three decades experience in the financial industry, Watson has evolved his career from Wall Street to launching social justice funds and designing ESG strategies for foundations. With Potlikker Capital, he says he’s working on what’s needed — a task that currently means taking a 45-day RV tour to meet growers across the United States.
“We wanted Jubilee Justice and Potlikker to be a new type of institution and not just a purveyor of money or knowledge,” he says. “Impact investing needs to move away from transactional investments to other levels of impact, such as building communities of practices that retain this knowledge and share it. At the systems level, this can inform policy to be more just with respect to people and climate.”
Watson and Mason realize the transition from conventional to organic farming is a long-term and costly decision, so they are tackling the challenge in a holistic way. In addition to grants, collateral support, and low-interest and zero-interest loans to farmers, they are helping on the demand side. Potlikker is developing agreements with some CPG companies to invest in their supply chain, which shifts some risk from the farmer back onto the system.
With a goal to provide healthier food and build wealth within Black, Indigenous, and other People of Color communities, Potlikker Capital also sees opportunities to stop the decline in acreage owned by Black farmers and number of Black growers and influence policy decisions.
“If you don’t have many BIPOC farmers, who’s talking to the USDA?” Watson asks. “It’s important from a political standpoint to save some of the 45,000 Black farmers, who are losing 30,000 acres a month — and support that number and grow it ecologically.”
Because farming is complex — involving policy, knowledge, luck, climate, and other factors — everything must come together for a successful growing year. Potlikker Capital has a goal to raise $50 million for 300 farms across the United States where growers agree to move along the pathway toward regenerative farming, Watson says. But initially it plans to deploy about $2 million a year, with an average deployment of $170,000 in a mix of grant and investment dollars.
With one loan made and five in the pipeline, Watson says Potlikker is already working with growers at various stages of the transition to organic. They are finding farmers through the work of Jubilee Justice, the National Black Food & Justice Alliance, and other partnerships.
“The first loan is a Black woman farmer in Louisiana who is growing rice, everything’s organic, with pigs and chickens breaking up the soil — it’s the model,” he says. “Others are traditional or conventional farmers who are willing to take a part of their land to test and to pilot. That’s why you need grant dollars. Taking five acres of their land and using sustainable and ecologically safe growing methods can be a two- or three-year proposition.”
Potlikker plans to create long-term relationships with farmers and share knowledge of farm practices and administrative tasks through regional cohorts or other community groups.
“Konda and I wanted an institution that was designed from its start to do care and feeding of [Black, Indigenous, and People of Color] farmers to help them reclaim methods of farming they had in their cultural histories that we are rebranding as ‘regenerative’ that Native communities have been doing for centuries,” Watson says. “We wanted to create something that would last beyond the two of us and represent their interest — to sit at the tables when there are policy issues and advocate for them.”
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